Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. New Models for Port Public-Private Partnerships American Association of Port Authorities 2011 Maritime Economic Development Seminar Joe Seliga Partner July 2011

Public-Private Partnerships for Ports Are Not New Ports are inherently public-private partnerships Port authorities do business with multiple private sector partners Port authorities enter numerous transactions that are public- private partnerships – Terminal leases – Agreements with carriers – Rail and intermodal agreements – Related real estate development

Old Concepts... New Models Full or Partial Concessions Including Capital Improvements – Oakland: 50 year concession for 5 berths; upfront plus annual payments and revenue share; capital improvement requirements and expansion provisions – Baltimore: 50 year concession for Seagirt Terminal; upfront plus annual payments and revenue share; capital improvement requirements; innovative tax-exempt financing for state infrastructure secured by lease payments – Virginia: Unsolicited bid process for full concession of port later suspended; current consideration of P3 options – Other concessions with capital requirements currently being considered include Galveston and Wilmington Hybrid Model for Traditional Landlord/Tenant Lease – Portland: 25 year lease; $8 million upfront plus annual payments and revenue share; allocation of maintenance responsibilities; collaboration related to marketing, future capital improvements

Why Consider Availability Payment Contracts? Limited public sector funding Specific projects need to move forward Concessions do not solve all problems Financial, operational, public policy, political factors may limit ability to utilize concession structure Some private sector investors not interested in non-revenue generating projects

What Are Availability Payment Contracts? Governmental entity enters into DBF(O)M contract with private sector entity – Design – Build – Finance – (Operate) – Maintain Private sector partner paid to the extent the project is “available” (i.e., completed on time and constructed and maintained according to specifications) Private sector partner finances project based on in part on payments to be paid by governmental entity

Benefits of Availability Payment Contracts Governmental entity retains control over asset Revenues (if any) are controlled by and accrued to the governmental entity Integrated construction and maintenance over term of project Life cycle cost benefits Greater certainty related to project delivery Risk transfer Encourages private sector innovation Could help close funding gaps (through cost savings and private sector equity investment in project)

What Are Availability Payment Contracts? Used for various infrastructure projects in the UK, Canada, Australia and elsewhere Increasingly being used in the United States: – I-595 and Port of Miami Tunnel in Florida – Presidio Parkway in California – FasTracks Eagle P3 in Denver – Currently being considered for numerous P3 road and mass transit projects across the country

Availability Payment P3s for Port Projects Defining project and revenue sources is critical Only certain “common user facility” port projects are potentially viable for availability payment P3s: – Levees, dikes, access channel dredging, port basins – Berth reconstruction and maintenance – Connecting roads and bridges and rail inter-connections – Certain port expansion projects Factors to consider when selecting projects: – Long-life asset (20 or more years) – Substantial project size ($100 million or more) – Projects with substantial long-term maintenance component

Classic and Availability Based P3 Structures Availability Approach Authority Government Bank Capital Funds Debt Maintenance Supplier Contractor DB M SPC Sponsor Bank Equity Debt Authority DBFM contract Classic Approach Maintenance Supplier Contractor DBM Equity provider

Classic and Availability Based P3 Costs Cost to Authority: Availability Approach Cost to Authority: Classic Approach Cost (USD) Cost (USD) Time = Capex = Maintenance =

Where’s the Beef? Availability payment transactions may help solve the funding gap but they don’t solve the funding issue Need sources of funding to make availability payments – Federal, state and local funding – Port authority funding – User fee charges – Other project revenues, if any

Legal Considerations Authorization: Does the port authority have legal authorization to enter into this type of transaction and enter into obligations under agreement? Procurement Process: Process that inspires public sector confidence; typically RFQ followed by intensive process with qualified bidders Project Financing: Private sector financing plan may involve issuance of tax-exempt debt by governmental entity or other government financing Allocation of Risks: Unforeseen site conditions, land acquisition, force majeure and delay events, changes in law and adverse actions can all affect payments to be made by governmental entity

Legal Consideration Allocation of Operations and Maintenance: Where government retains operation and private sector retains maintenance, need clear allocation of responsibilities between parties Appropriation Risk: What is the obligation of the governmental entity to appropriate and pay the required amounts? Defaults and Termination: Need sufficient remedies for public and private partners and financing parties; could affect availability payments to private sector; could require termination payments by governmental entity (even in the case of private sector default but at lower amount)

What PPPs are NOT Easy Money: Choose projects that are well suited to PPP structure— attractive to investors, can get done sooner and can free up public money for other projects Always Big Upfront Payments: Understand how PPPs can best be used for port projects One Size Fits All: Determine objectives, understand different structures and apply best model to transaction Applicable to Every Project: Use PPP strategically for the right projects

What PPPs are NOT Traditional Procurement BUT Also NOT Outsourcing: Learning to balance public and private interests sometimes can be difficult A Way to Avoid Public Policies: Determine public policy objectives as they relate to PPP process Easy: Come at PPPs with two feet in and an open mind

Thank You Joe Seliga Mayer Brown LLP 71 South Wacker Drive Chicago, Illinois